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UNCLAS SECTION 01 OF 04 AMMAN 003991
SIPDIS
SENSITIVE
USTR FOR NOVELLI/SAUMS
TREASURY FOR OASIA
USDOC 4520/ITA/MAC/ONE/PTHANOS
PASS OPIC
E.O. 12958: N/A
TAGS: ETRDEINVJOXF
SUBJECT: Secretary Powell/Trade Rep Zoellick Discuss
Middle East Free Trade Initiative with Arab Ministers
SENSITIVE BUT UNCLASSIFIED
------------------------
Introduction and Summary
------------------------
¶1. (SBU) King Abdullah convened a breakfast meeting June
23 with Secretary Powell and Trade Representative
Zoellick at the World Economic Forum (WEF) meeting in
Jordan to discuss the President's Middle East free trade
initiative with the heads of Arab delegations to the WEF.
Participating Arab ministers responded enthusiastically
to presentations by Secretary Powell and USTR Zoellick on
the President's free-trade vision and the steps required
to realize it. They noted the linkages between trade,
economic and social development, and regional peace and
security. They also made constructive points about the
practicalities of implementing the ambitious agenda and
the opportunity offered by free trade between the region
and the United States. End Summary
--------------------------------------
King Abdullah Welcomes U.S. Initiative
--------------------------------------
¶2. (SBU) The King opened the discussion by welcoming the
trade initiative for the Middle East that the President
announced in his University of South Carolina speech. He
described how Jordan's economy had benefited from opening
to international trade and investment, including the Free
Trade Agreement and Bilateral Investment Treaty it
concluded with the United States. Annual trade between
the U.S. and Jordan increased from under $20 million to
over $500 million in five years. Over 30,000 new jobs
were created and over $100 million in new Foreign Direct
Investment (FDI) was attracted to the country. At the
same time, the King warned that opening an economy was
hard work: Jordan enacted new laws protecting
intellectual property, the environment and labor rights,
and had reformed its investment and trade laws and
regulations.
--------------------------------------------- -------------
Secretary: Trade Part of the President's Vision for Region
SIPDIS
--------------------------------------------- -------------
¶3. (SBU) Secretary Powell described how the President's
goal of a free trade area in the Middle East within ten
years fits with our vision for engaging with the region.
Building peace means creating economic security and
opportunity for the large number of young people entering
the region's workforce. As countries drop trade
barriers, the Middle East Partnership Initiative (MEPI)
would help countries invest in their future through
programs supporting education, political reform and
empowering women. The Secretary said that it was
important that countries act now, and pointed to Jordan
as an example of the great potential of trade to generate
income and jobs when a country takes the initiative to
change. The President, the Secretary affirmed, is
totally committed to this vision for the region.
--------------------------------------------- -----------
Zoellick: A Step by Step Process to Regional Free Trade
--------------------------------------------- -----------
¶4. (SBU) Foreshadowing the speech to the WEF plenary
assembly he would deliver later that morning, USTR
Zoellick took the floor to describe how the United States
foresaw realizing the President's regional trade vision.
He said that the United States needed first to listen and
learn from its partners in the region. Since different
countries were at different stages in opening to
international trade, it would be necessary to customize
our interaction to their individual needs. Thus,
Ambassador Zoellick foresaw the following order of
actions.
1) Working to bring countries not currently members of
the WTO into that organization.
2) Expanding the region's use of Generalized System of
Preferences (GSP) benefits. (The Ambassador
compared the $300 million the region currently
exports to the U.S. under GSP with the $2 billion
per year exported by Brazil under the program.)
3) Negotiating Trade and Investment Framework
Agreements (TIFAs) with countries that do not
Currently have such agreements with the United
States.
4) Concluding Bilateral Investment Treaties (BITs) with
countries that do not yet have them.
5) Building a comprehensive FTA relationship with and
among the countries of the region and the United
States.
In this process, countries like Jordan, Morocco, and
Bahrain -- which either already have or will be
negotiating and concluding FTAs with the United States --
will serve as models and sub-regional hubs for building a
regional system.
¶5. (SBU) This process would, the Ambassador said,
encourage not only greater trade between the United
States and the region, but greater trade within the
region as well. Cumulation of origin among countries
that are working toward FTA's with countries that already
have FTA's would be an important way to encourage intra-
regional trade. Countries with cumulation might then be
drawn together into regional arrangements. At the same
time, the United States would provide assistance,
particularly through the MEPI program, to help countries
develop their capacities to negotiate and implement free
trade agreements and to develop their economies and
societies to be ready to take greater advantage of a
stronger relationship with the international trading
system. For example, U.S. assistance could help
countries develop stronger institutions to oversee
investment.
-----------------------------------------
Arab Ministers Welcoming and Constructive
-----------------------------------------
¶6. (SBU) Ministers from Arab countries attending the
breakfast joined King Abdullah in welcoming the
President's initiative and appreciated the presentations
of Secretary Powell and Ambassador Zoellick. They also
made the following specific points:
-- Palestinian Trade Minister Maher Masri said that there
had been an implicit agreement at the Camp David talks
that the PNA should become an observer in the WTO. He
hoped that this would occur and appreciated the technical
and political support of breakfast participants to that
end. Ambassador Zoellick called this an "excellent idea"
on which he hoped to work closely with Secretary Powell.
He noted the U.S. support provided through USAID to
reform Palestinian commercial law and promote small
business.
-- Foreign Minister Hamad bin Jassem of Qatar proposed a
committee be formed to meet on a regular basis to work
out how to solve issues in countries and regions and keep
up the momentum of the initiative. Noting a hundred-fold
increase in U.S.-Qatari investment, he added that Qatar
was in the process of creating an investment authority.
-- Observing that different counties were at different
stages in their discussions of FTAs with the U.S.,
Egypt's Foreign Minister Muhammad Maher asked if the
President's idea was to have a set of bilateral
agreements that would eventually be bound up in a
regional agreement, or for the two processes to proceed
in parallel. Ambassador Zoellick replied it was most
likely that bilateral agreements would be connected over
time, perhaps initially on a sub-regional level.
Referring to a recent move by the Egyptian foreign
ministry to overrule the trade ministry on a key trade
decision, Zoellick also said it was critical that
countries be completely committed to the process of
economic opening. The initiative and momentum had to
come from the countries within the region, he said.
-- Finance and National Economy Minister Saif of Bahrain
especially welcomed U.S. assistance on capacity building
and technical assistance to help increase trade flows.
He hoped agencies like the U.S. Export Import Bank and
OPIC would expand their activities in the region. He
also suggested "offset" agreements were potentially
useful tools to encourage investment in the region.
-- Omani Foreign Minister Yusef bin Alawi said Oman was
interested in "joining hands" with the United States,
potentially through a TIFA, but hoped the United States'
commitment over time would match its words now.
Ambassador Zoellick said the President's effort to obtain
Trade Promotion Authority and extension of preferential
arrangements including GSP showed his commitment to free
trade. Jordan had shown it was possible move quickly in
trade negotiations. Waiting for legislation like the
Baucus/McCain proposals (which would legislatively create
new regional trade preferences) could take a long time,
Zoellick said.
-- Foreign Cooperation Minister al-Fasi said Morocco had
been very pleased that in its FTA negotiations the United
States had been willing to take into account Morocco's
level of development and the sensitivity of certain
sectors, particularly agriculture. He hoped programs
like the Millennium Challenge Account and MEPI would help
Morocco and other countries get through the difficult
period of social and economic transition to free trade.
Ambassador Zoellick agreed the key to success was
creating jobs, and noted the increased interest U.S.
companies were showing in investing in Morocco since the
start of FTA negotiations.
-- Arab League Secretary General Amer Moussa said the
President's initiative was highly commendable and called
on Arab countries to engage. He thought the Arab League
could play a role in helping members share experiences
and prepare for negotiations. He added that he thought
regional negotiations with the U.S. would need to be
coordinated with parallel trade negotiations with the
European Union. Finally, he hoped that these processes
would give "a shot in the arm" to the Arab League's
effort to negotiate a regional free trade agreement by
2005 (see 02 Amman 5212).
-- Mohamed Jouini, Tunisia's Development and
International Cooperation Minister, pointed to Tunisia's
positive experience in opening its economy, having been
the first in the region to negotiate an EU Partnership
Agreement. He highlighted the connection between trade
and investment and noted the importance of investing in
human resources, especially to take advantage of high
value-added opportunities.
-- Taking the floor for the PNA, Foreign Minister Nabil
Sha'ath called on Secretary Powell to make trade the
"first priority" in the Road Map to peace through
relaxations of controls on movements of Palestinians.
-- Finally, Jordan's Trade Minister Salah al-Bashir
suggested that to keep up the momentum of this meeting,
ministers agree to meet again with U.S. representatives
to discuss ways to move forward.
----------------------
Conclusion and Comment
----------------------
¶7. (SBU) In a press conference with Secretary Powell,
Ambassador Zoellick, and Trade Minister al-Bashir
immediately following the breakfast, Jordanian Foreign
Minister Marwan Muasher read an agreed statement that
expressed the hope that the dialogue begun over breakfast
would continue. Participating Arab ministers seemed both
enthusiastic about the U.S. initiative and sober-minded
about the challenges such an effort would entail. A
recurring theme of the breakfast was also the mutually
supportive relationships between the Free Trade
Initiative, MEPI and the efforts to establish broad peace
and security in the region.
¶8. (U) (USTR did not have the opportunity to clear this
report prior to departing the region.)
------------
Participants
------------
King Abdullah of Jordan
Prince Hamza, Crown Prince of Jordan
Prince Feisal, Chief of Staff, Royal Jordanian Air Force
Prime Minister Ali Abul Ragheb of Jordan
Trade and Industry Minister Salah Bashir of Jordan
Foreign Minister Marwan Muasher of Jordan
Planning Minister Bassem Awadallah of Jordan
Mr. Abdulla Hassan Saif, Finance and National Economy
Minister of Bahrain
HH Hamad bin Jassem, Foreign Minister of Qatar
Mr. Ahmad Maher, Foreign Minister of Egypt
Mr. Yousef bin Alawi, Foreign Minister of Oman
Dr. Nabil Shaath, Foreign Minister, PNA
Mr. Maher Masri, Economy Minister, PNA
Sheikh Fahem Kasemi, Economy & Trade Minister, UAE
Mohamed Al Nouri Aljuweini, Development and International
Cooperation Minister, Tunisia
Mr. Khaled Rajeh al-Sheikh, Trade and Industry Minister,
Yemen
Mr. Al-Tayeb Al-Fahri Al-Fasi, Minister of State for
Foreign Affairs, Morocco
Mr. Abdullah al-Yarza, Minister of State, Saudi Arabia
(head of delegation)
Prince Sultan bin Salman Abdul Aziz, Saudi Arabia
Prince Turki bin Faisal, Director of Islamic Research
Studies, Saudi Arabia
Mr. Amre Moussa, Secretary General of the Arab League
Secretary of State Colin Powell
SIPDIS
U.S. Trade Representative Robert Zoellick
Ambassador Edward Gnehm
Assistant Secretary of State William Burns
Assistant Secretary of State Richard Boucher
Assistant U.S. Trade Representative Catherine Novelli
Assistant U.S. Trade Representative Christopher Padilla
Deputy Assistant Secretary of State Shaun Donnelly
Deputy Assistant Secretary of State Elizabeth Cheney
Craig Kelly, Advisor to Secretary Powell
National Security Council Director Daniel Sullivan
Emb Amman Econ Counselor Tom Goldberger (notetaker)
Gnehm